The Best Buy to Let Mortgage Information
Wanting to buy or remortgage a buy to let property? You’re in good hands. Getting the best buy to let mortgage deal can be difficult, as the criteria for getting one is different to that of a standard mortgage. Read on to find out!
For those who are unaware, a buy to let mortgage is basically a loan used for purchasing a property which is then let to tenants instead of being lived in by the borrower. As this is a business transaction the rates and fees tend to be higher than with a standard mortgage. But does that mean that anyone can get one? We’re going to walk you through the criteria so you can help decide on the best buy to let mortgage for you.
Best Buy to Let Mortgage Information
You’ll need to want to invest in property:
While this shouldn’t come as a shock, (the clue is in the name) you’re going to need to want to invest in a property to get a buy-to-let mortgage. This means that you should do your research as well. Make sure that you run over the property type with your chosen lender, as this can be a potential thorn in your side. Some lenders tend to prefer houses which have a more usual construction as it is easier to solve any potential maintenance problems & there's less exposure to potential legal issues over ownership or absent freeholders.
You must an income above £25,000 !!!
Although there are lenders that have no minimum income & a few that have a minimum income of £20,000, if you want access to a vast majority of the BTL lenders then you're going to require a minimum income of £25,000.
With regards to deposits, the minimum deposit that you must pay on a buy to let mortgage usually situates itself in the 25% bracket. Although it can range anywhere between 20-40%. Often the deposit can be driven by the rental income. You may have a 25% deposit but, unless the rental income fits your chosen lenders criteria you could find yourself putting down a larger deposit or looking for an alternative lender.
Interest rates and financial regulations:
Most people tend to opt for interest-only payments on their Buy to Let mortgage. What this means is that you won’t pay any of the capital per month but then once your mortgage term has finished you will pay this sum in full. This tends to be easier to sustain in the context of a buy to let mortgage as the rental income is far greater than the mortgage payments giving the borrower a cash flow from the tenants.
A lot of buy to let mortgages are not regulated by the Financial Conduct Authority (FCA). However, there are exceptions to this. For example, if you wanted to let the house to a relative, spouse or partner. These are called consumer buy to let mortgages which are then assessed in line with the same affordability assessment that is conducted when one applies for a residential mortgage.
Affordability assessments in the context of a standard residential mortgage are used to assess whether the borrower has the capability to pay back the amount that they borrow from the lender. This involves looking at income, credit score and day-to-day expenditure. But if you’re letting the property there are surely this assessment is different, right? Of course! But don’t worry.
The main thing that will be accessed by the lender is the rental income. Most lenders require a minimum rental income in excess of 125% of your monthly mortgage payment, based on an imaginary rate of say 5%. Lets run the numbers - £100,000 mortgage at 5% will cost £5000 (100,000 x 5%). If we divide £5000 by 12 we have the monthly mortgage payment - £416.67. Take this monthly payment & multiply by 125% & you get a figure of £520.84. If you have clean credit, sufficient deposit or equity & your monthly rental income is in excess of £520.84 then, you're probably good to go.
Which lender should you go for?
So we’ve gone over the basics and now you’re deciding which lender to go for. This is where we step in! At Mortgages Online we can be a great starting point for you to find the best buy to let mortgage for you. We know that different lenders are all going to be trying to tell you that they have the best deal going, so why not make life easy for yourself. Compare 1000s of the best buy to let mortgages from 100s of lenders.
Mortgages Online can also offer you life insurance after you’ve completed your mortgage application. What’s even better is that all of our services are fee-free – no need to get that credit card out!